Clearing The Clutter: 4 Financial Tips

The beginning of a new year means a fresh start. It’s a time to plan for the months ahead and set goals. Wanting to be financially prepared is a common goal among Canadians, yet only 28 per cent feel like they are1. Our counterparts south of the boarder share a similar sentiment, with 70 per cent of Americans currently worried about their finances2.

Being financially organized contributes greatly to feeling prepared. Managing your finances can include a lot of documents (tax returns, monthly bills, bank statements, income statements, invoices, etc.) which are often scattered throughout your home. Having a central place for all of your financial information makes it easier to find the appropriate document when it’s needed.

Getting organized financially also means addressing your financial situation. Do you follow a budget? Have you been saving aggressively for retirement? If you haven’t been addressing these things, it’s a great time to get started.

If you’re ready to get your finances in order, here are four simple things that you can do now:

1. Create a budget (if you don’t already have one) …and stick to it.

Where does the money go? Every good financial plan needs a budget that answers that question. Budgeting can help guide you towards good decisions when it comes to saving, spending and investing. The challenge is to find balance. Balancing a budget means figuring out how to spend less than you make to break the debt cycle3.

2. Manage your debt.

Reducing debt doesn’t require an intricate strategy. Following simple rules like living within your means by not spending more than you earn is key for making a dent in your debt. If you’re carrying balances at high interest rates, you can do a balance transfer to a less expensive form of credit. If you’re making minimum payments each month, it will keep you in debt for what seems like forever. You must pay more than the minimum to dig yourself out of debt.

3. Plan for retirement.

Whether you are close to retirement age or just starting out in the working world, there is a lot to consider when planning for the day when you will eventually stop working. To properly plan your retirement income, you’ll need to:

Learn about potential sources of retirement income

In addition to government benefits, these are sources of retirement income to consider:

Understand the financial challenges in retirement

Among many challenges retirees face, the following can impact finances:

The potential to outlive retirement savings

Poor market returns, especially in the early years of retirement

The rising cost of living

The need to access savings for future unexpected expenses or emergencies

Having the ability to successfully manage an investment portfolio

Planning an estate and ensuring it passes to family or loved ones as you wish

Understand that no single product can address every retirement challenge, so it’s often a better strategy to hold a mix of retirement income products in your portfolio.

Determine your expenses in retirement

Determining your expenses in retirement ahead of time can be difficult, but Manulife offers some tools that can help. Try our Income and Expense Worksheet and share the findings with your advisor.

4. Think about the future.

You might be thinking “I’m too young to need a will”, but every adult should have a have one, regardless of age. A will, which is usually quick and easy to create with the help of a lawyer, generally sets out:

Directions for the distribution of assets after your death

The beneficiaries of the estate

The executor(s) who will administer your estate

Guardians for any minor children

Estate planning is the process of structuring your affairs to preserve wealth and plan for the orderly administration and distribution of your remaining assets according to your wishes. Good legal and financial advice can help relieve stress on your family and help your estate pay as little in taxes as possible4.